Santa Rudd is coming to town

Published in Government News (Canberra), 11 December 2008

For Australia’s mayors and shire presidents, Christmas came a bit earlier this year—on 18 November, to be precise. But Santa Claus did not come to town. Instead, the towns went to Santa, played by no other than the prime minister himself. Kevin Rudd clearly enjoyed his new role, handing out a total of $300 million in pre-Christmas giveaways at the inaugural meeting of the Australian Council of Local Government in Canberra.

Santa Rudd showered the country’s local leaders with money to pay for new swimming pools and libraries, town hall repairs, and roundabouts. There were Christmas hampers for every single one of Australia’s 565 local council areas, sized from a minimum of $100,000 for the smallest authorities to almost $3m for Brisbane City, the largest local government area. Unlike the real Santa, the prime minister did not even ask whether the mayors had been naughty or nice.

There were smiles all around when Mr. Rudd and his new best friends from the country’s towns and cities got together last month. Both sides were happy with the deal. The government could show it was doing something to fight the economic crisis, while local governments, always short of resources, were only too happy to open their hands and receive a welcome bundle of cash. No doubt they will spend it as quickly as Mr. Rudd told them to.

Even the opposition had few complaints about the Rudd government’s dealings with the councils. Apart from its quip that handouts should have been linked to some kind of performance standard, it couldn’t find any reason to question the whole arrangement. But was it really so hard to see why the new partnership between the federal government and local leaders is problematic?

For a start, it is questionable whether the government will produce the economic stimulus it desires from this package. At the Canberra meeting, Kevin Rudd argued that the money would pay to employ all sorts of craftsmen for months on end. But employing a few people for some time is never difficult if you have $300 million to spend. Had Rudd used the money for an across-the-board tax cut, it would have been spent by companies and households instead, and that, too, would have created new jobs. To pretend that only government spending can secure employment is one of the oldest tricks in the politician’s repertoire. It is surprising we still let them get away with using it so often.

But even if we accepted that it was the government that should provide fiscal stimulus in economically difficult times, it is not clear whether councils are up to the job. True, the Rudd government demanded they spend the extra cash on new projects, not on things that had been planned anyway. But who is going to monitor this? Santa Claus would be perfect for this task, because he sees you when you’re sleeping, he knows when you’re awake, and he knows if you’ve been bad or good. So be good, for goodness’ sake!

But despite his best attempts, Mr. Rudd won’t be quite as effective as the real Santa. There is no way the government could check, let alone enforce, compliance by councils, who will always find ways to spend the money as they wish even if it is on long-planned projects.

To avoid misunderstandings, let’s be clear that in principle there can be no objection to strengthening local governments’ financial positions. It is a well-known fact that Australia’s system of local government is exceptionally weak by international standards. Australia’s councils fulfil fewer tasks than their counterparts abroad, and they rely on the state and federal governments for about a third of their budgets. To make matters worse, their legal position is weak. The Australian Constitution does not mention them even in passing, and the states’ constitutions do not grant them much protection or autonomy either.

Of course, Kevin Rudd knows this. He also knows that, historically and constitutionally, councils are an area for which the states, not the commonwealth, have been responsible. The only way for Rudd’s federal government to become more involved at the local level is by buying himself into it. And that is precisely what he has done. What may at first look like a selfless act of pre-Christmas generosity may soon turn out to be an attempt to bypass the states and bind local government closer to the commonwealth. The councils who now so willingly accept federal funds should be warned that doing so may just lead them from dependence on the states to a new dependence on Canberra. It is doubtful whether that is what Rudd’s new friends should wish for.They’d better watch out. They’d better not cry. They’d better not pout. I’ll tell them why—Santa Rudd is coming to town!

Even if we left aside the worries that stem from local government now being in the commonwealth’s pocket, there is still something deeply unsatisfying about the $300m transfer. Few would disagree that local government needs better funding to do its job properly. In many local government areas, the state of public infrastructure is indeed lacking. But will a one-off cash injection, completely at the commonwealth’s discretion, do much to fix this?

The commonwealth is trying to alleviate the symptoms of local government underfunding by bankrolling a one-time Christmas shopping spree. But what local government really need is a long-term reform of federal, state, and local government financial arrangements that would make it possible for each tier to stand on its own feet.

This may be something for next year’s Christmas wish list. Whether Santa Rudd can deliver long-term solutions, or just a Christmas cracker full of quickly forgotten gimmicks, is a different question.